Saturday, June 2, 2012
Able To Waive Attorney-Client Privilege In A Single Disclosure: 9th Circuit Rejects Selective Waiver Doctrine In Superman Case
In its 1977 opinion in Diversified Industries, Inc. v. Meredith, 572 F.2d 596 (8th Cir. 1977), the Eighth Circuit adopted the selective waiver doctrine, which allows corporations seeking to use a confidentiality agreement to disclose to the government information protected by the attorney-client privilege and still maintain that privilege against all others. Here's the relevant language from the court's opinion:
We finally address the issue of whether Diversified waived its attorney-client privilege with respect to the privileged material by voluntarily surrendering it to the SEC pursuant to an agency subpoena. As Diversified disclosed these documents in a separate and nonpublic SEC investigation, we conclude that only a limited waiver of the privilege occurred....To hold otherwise may have the effect of thwarting the developing procedure of corporations to employ independent outside counsel to investigate and advise them in order to protect stockholders, potential stockholders and customers.
But since Meredith, every other federal circuit to address the issue has rejected the selective waiver doctrine:
In re Qwest Commc'ns Int'l, 450 F.3d 1179, 1197 (10th Cir.2006); Burden–Meeks v. Welch, 319 F.3d 897, 899 (7th Cir.2003); In re Columbia/HCA Healthcare Corp. Billing Practices Litig., 293 F.3d 289, 295 (6th Cir.2002); United States v. Mass. Inst. of Tech., 129 F.3d 681, 686 (1st Cir.1997); Genentech, Inc. v. United States Int'l Trade Comm'n, 122 F.3d 1409, 1416–18 (Fed.Cir.1997); In re Steinhardt Partners, L.P., 9 F.3d 230, 236 (2d Cir.1993); Westinghouse Elec. Corp. v. Republic of Philippines, 951 F.2d 1414, 1425 (3d Cir.1991); In re Martin Marietta Corp., 856 F.2d 619, 623–24 (4th Cir.1988); Permian Corp. v. United States, 665 F.2d 1214, 1221 (D.C.Cir.1981).
After In re Pacific Pictures Corp., 2012 WL 1640627 (9th Cir. 2012), a case involving D.C. Comics suing the heirs of the creators of Superman and others, you can now add the Ninth Circuit to their ranks.The Man of Steel was created by writer Jerome Siegel and illustrator Joe Shuster, and, around the turn of the millennium, Marc Toberoff, a Hollywood producer and attorney,
approached the[ir] Heirs with an offer to manage preexisting litigation over the rights Siegel and Shuster had ceded to D.C. Comics. He also claimed that he would arrange for a new Superman film to be produced. To pursue these goals, Toberoff created a joint venture between the Heirs and an entity he owned. Toberoff served as both a business advisor and an attorney for that venture.
While the preexisting litigation was pending, Toberoff hired a new lawyer to work for one of his companies. This attorney remained in Toberoff's employ for only about three months before allegedly absconding with copies of several documents from the Siegel and Shuster files. Unsuccessful in his alleged attempt to use the documents to solicit business from the Heirs, this attorney sent the documents to executives at D.C. Comics. While he did not include his name with the package, he did append a cover letter, written in the form of a timeline, outlining in detail Toberoff's alleged master plan to capture Superman for himself.
This happened no later than June 2006, and the parties have been battling over what should be done with these documents ever since. Rather than exploiting the documents, D.C. Comics entrusted them to an outside attorney and sought to obtain them through ordinary discovery in the two ongoing lawsuits over Superman. Considering every communication he had with the Heirs to be privileged—regardless of whether the communication was in his capacity as a business advisor or an attorney—Toberoff resisted all such efforts. Ultimately, in April 2007, a magistrate judge ordered certain documents, including the attorney's cover letter, turned over to D.C. Comics. A few months later, Toberoff at long last reported the incident to the authorities (specifically the Federal Bureau of Investigation). In December 2008, Toberoff finally produced at least some of the documents.
Thereafter, in 2010, D.C. Comics filed an action against Toberoff, the heirs, and three entities in which Toberoff owned a controlling interest, claiming that Toberoff interfered with its contractual relationships with the heirs. The attorney's cover letter formed the basis of the lawsuit and was incorporated into the complaint, with the defendants claiming that the letter was covered by attorney-client privilege.
About a month after the suit was filed, Toberoff asked the Office of the United States Attorney for the Central District of California to investigate the theft. In response to a request from Toberoff, the U.S. Attorney's Office issued a grand jury subpoena for the documents as well as a letter stating that if Toberoff voluntarily complied with the subpoena the Government would "not provide the...documents ... to non-governmental third parties except as may be required by law or court order." The letter also confirmed that disclosure would indicate that "Toberoff has obtained all relevant permissions and consents needed (if any) to provide the...documents...to the government." Armed with this letter, Toberoff readily complied with the subpoena, making no attempt to redact anything from the documents.
Immediately thereafter, D.C. Comics requested all documents disclosed to the U.S. Attorney, claiming that the disclosure of these unredacted copies waived any remaining privilege, and a magistrate agreed, finding that a party may not selectively waive attorney-client privilege. Toberoff and company thereafter sought to overturn the magistrate's order through a writ of mandamus, which led to the Ninth Circuit's opinion in Pacific Pictures.
In Pacific Pictures, the Ninth Circuit noted that it had twice deferred judgment on the issue of whether to endorse the selective waiver doctrine and acknowledged that every circuit to address the doctrine since Meredith had rejected it. The Ninth Circuit then agreed with these circuits primarily because the selective waiver doctrine
does little, if anything, to serve the public good underpinning the attorney-client privilege. That is, "selective waiver does not serve the purpose of encouraging full disclosure to one's attorney in order to obtain informed legal assistance; it merely encourages voluntary disclosure to government agencies, thereby extending the privilege beyond its intended purpose."
In reaching this conclusion, the court found comfort in the fact that since Meredith,
there have been multiple legislative attempts to adopt a theory of selective waiver. Most have failed....Given that Congress has declined broadly to adopt a new privilege to protect disclosures of attorney-client privileged materials to the government, we will not do so here.
The Ninth Circuit also rejected the alternate argument that "even if we reject selective waiver as a general matter, we should enforce a purported confidentiality agreement based upon the letter from the U.S. Attorney's Office." This argument fell on deaf ears as well because
The only justification behind enforcing such agreements would be to encourage cooperation with the government. But Congress has declined to adopt even this limited form of selective waiver. See Statement of Congressional Intent Regarding Rule 502 of the Federal Rules of Evidence, 154 Cong. Rec. H. 7817 (2008), reprinted in Fed.R.Evid. 502 addendum to comm. n subdivision (d) (noting that Rule 502 "does not provide a basis for a court to enable parties to agree to a selective waiver of the privilege, such as to a federal agency conducting an investigation"). As such, we reject such a theory here.